How to prevent vehicle repossession in Australia

If you take out a loan to buy a car, you usually agree that if you cannot pay back that loan then the lender can take possession of the car. To recoup the money they are owed in this scenario, the lender may sell this repossessed car. This is also referred to as a secured car loan, as the vehicle is used as security, or collateral, against the loan.

Repossession can be a stressful experience and is likely to impact your credit score as you are most likely defaulting on the loan for a repossession to occur. For this reason, it’s important to know the best course of action to prevent a repossession.

How to avoid repossession

No one applies for a car loan assuming the worst will happen and repossession may occur. Unfortunately, your financial circumstances may change, such as a job loss or reduction in hours, and this may cause you to struggle to repay your debts.

If you’re facing difficulties with your loan instalments and don’t want your car repossessed, you can try to apply for hardship assistance. Reach out to the lender to delay enforcement. If you explain the situation, they may give you a bit of extra time or come up with a payment plan.

When the lender cannot repossess your car

The lender cannot repossess your car without the consent of the court under some circumstances. These are, if the outstanding loan amount is:

1. less than 25 per cent of the original amount borrowed, or
2. less than $10,000, whichever is lower.

If the lender still tries to repossess, you can request to see a copy of a court order allowing this.

How do I get my repossessed car back?

If you’re trying to figure how to get a repossessed vehicle back, these pointers may help:

• If the lender breaches the requirements mentioned above and threatens to repossess your vehicle, you can complain to the Australian Financial Complaints Authority (AFCA) to prevent repossession. Once you opt to have the AFCA hear your complaint, the repossession hits a pause till the matter gets determined. You may be able to use this time to show the lender that you’re able to repay the outstanding amount or resolve the issue.
• If your car does get repossessed, the lender needs to send you a default notice. This should include details of the car’s estimated value, the cost of repossession, any ongoing costs, and your rights under consumer law. This information may help to make a decision about what to do next.
• If the lender fails to send you the notice, you may be able to get your repossessed car back. For the next 21 days, calculated from the date that the notice was sent, you can try and find a seller who is willing to buy the car for at least the estimated value. If the seller agrees, you have to let the lender know in writing.
• If you feel that a dealer has sold your car by violating the law, you may have the right to have the car returned to you.

Can you still get a car loan with a repossession?

A credit report may have the loan default, and therefore the repossession, on the record for seven years, which will affect your credit score and your chances of getting future approval for financial products. Sometimes you can explain what led to the repossession in your credit report. It may not improve your credit score, but new lenders may be more lenient in some circumstances.

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